Has the market done it again? Two weeks ago, Putin's first speech of the Ukraine conflict was taken by the USDJPY algos - which seemingly need to take a remedial class in Real Politik - as a conciliatory step, and words like "blinking" at the West were used when describing Putin, leading to a market surge. Promptly thereafter Russia seized Crimea and is now on the verge of formally annexing it. Over the weekend, we had the exact same misreading of the situation, when the Crimean referendum, whose purpose is to give Russia the green light to enter the country, was actually misinterpreted as a risk on event, not realizing that all the Russian apparatus needed to get a green light for further incursions into Ukraine or other neighboring countries was just the market surge the algos orchestrated. Anyway, yesterday's risk on, zero volume euphoria has been tapered overnight, with the USDJPY sliding from nearly 102.00 to just above 101.30 dragging futures with it, in advance of Putin's speech to parliament, in which he is expected to provide clarity on the Russian response to US sanctions, as well as formulate the nation's further strategy vis-a-vis Crimea and the Ukraine.

"We can't come out of this with a shadow of doubt about the integrity of the Bank of England," Governor Mark Carney told MPs this morning on the heels of the report, as we noted here, that found no collusion by the bank to manipulate FX rates. A senior BoE employee was told of "attempts to move the market" but "did not convey to [Monetary Policy Committee member Paul Fisher] that markets were being rigged," and therefore was suspended. While many have called this "as bad as Libor" the BoE remains adamant of its lack of involvement but is still restructuring itself - adding that "it isn't our job to go out hunting for rigging of markets." Nope, just to ignore it, we presume. MPs were not impressed.

Paul Fisher Head of Markets at the Bank of England told the economic worriers of the UK that the BoE would not pull the stoppers out on the economic stimulus plan in the UK and that the “macroeconomic outlook here is not as bright as in the US, therefore we are some way behind them in terms of return to anything like trend growth”. Has Mr. Fisher been to the US recently?

Please do not adjust your monitors: that strange, non-green color greeting you this morning is not a "glitch." Following yesterday's market drubbing, in which a modest 1% decline in the S&P ended up being the biggest market drop of 2013, we next got a wipe out in China, where the SHCOMP plunged by 3% the most in 15 months, down the third day out of four since the start of the year of the Snake on renewed concerns around home purchase restrictions urged by the government, but mostly driven by rampant liquidations of commodity-related stocks following yet another liquidity withdrawing repo (not reverse) by the PBOC which took out even more money out of the market. We then continued to Europe where despite the near-record surge in German optimism (because in the New Normal hope is a strategy - the only strategy), German manufacturing PMI missed expectations of a rise to 50.5 from 49.8, instead printing at 50.1, while the Services PMI outright declined from 55.7 to 54.1 (55.5 expected). We wonder how much higher this latest economic disappointment will push German investor confidence. Not too unexpectedly, Europe's suddenly weakest economy France also disappointed with its Mfg PMI missing as well, rising from 42.9 to 43.6, on expectations of a 43.8 print, while Services PMI declined from 43.6 to 42.7, on "hopes" of a rise to 44.5. The result was a miss in Europe's composite PMIs with the Manufacturing posting at 47.8 on expectations of 48.5, while the Services PMI was 47.3, with 49.0 expected, and a blended PMI missing just as much, or 47.3 with 49.0 expected, and down from 48.6. The news, which finally reasserted reality over hopium, immediately pushed the EURUSD to under 1.32, the lowest print since January 10. Therefore while Germany may or may not escape recession in Q1, depending on how aggressively they fudge their export numbers, for France it seems all hope is now lost.

There are clear signs of a liquidity crunch in the asset markets right now, and the question I keep hearing is, Is this 2008 all over again? No, it’s worse. Much worse. In 2008 there was a lot more faith and optimism upon which to draw. But both have been squandered to significant degrees by feckless regulators and authorities who failed to properly address any of the root causes of the first crisis even as they slathered layer after layer of thin-air money over many of the symptoms. Anyone who has paid attention knows that those "magic potions" proved to be anything but. Not only are the root causes still with us (too much debt, vast regional financial imbalances, and high energy prices), but they have actually grown worse the entire time. As always, we have no idea exactly what is going to happen and when, but we can track the various stresses and strains, noting that more and wider fingers of instability increase the risk of a major event. Heading into 2012, there's enough data to warrant maintaining an extremely cautious stance regarding holding onto one's wealth and increasing one's preparations towards resilience.